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Last month we discussed several tax law issues related to offshore bank accounts and a U.S. tax probe that targets Swiss banks. California taxpayers caught hiding money in foreign bank accounts can face civil and criminal penalties associated with the failure to disclose all foreign assets on federal income tax returns. The IRS has intensified its scrutiny of foreign countries with strict banking privacy rules because it believes that taxpayers in California and across the country are using foreign accounts for tax evasion purposes.

The IRS recently fined several foreign banks for harboring the offshore accounts of U.S. taxpayers and Credit Suisse Group AG recently announced that it would disclose the names of taxpayers that the IRS suspects of evading taxes.

Credit Suisse is Switzerland’s second largest bank after UBS AG, which recently handed over names of 4,000 American account holders and paid a $780 million fine for enabling offshore tax evasion. This week the Swiss government ordered Credit Suisse to immediately hand over data related to U.S. taxpayers that allegedly hold secret Swiss accounts through corporations. Switzerland used to thrive off of American accounts and became the world’s largest offshore financial hub with over $2 trillion in assets.

California taxpayers with undisclosed accounts in other Swiss banks should be wary of these developments. Experts believe that the UBS and Credit Suisse disclosures have set a precedent and that more banks will be forced to disclose customer data in the future. This means that the amount of tax evasion charges against Californians with offshore accounts will likely increase.

Source: Wall Street Journal, “Credit Suisse to Name Names,” Deborah Ball, Laura Saunders, Nov. 9, 2011